A Sense of Higher Purpose

My argument is that Goldman employees are socialized to believe their work is fulfilling a higher social purpose, and that this contributes to their justification, or rationalization, of what others view as ethically (and some have claimed legally) inappropriate behavior. As covered earlier, public service is deeply embedded in the culture. (See appendix E, which is from Goldman’s governance report. No other bank has disclosed as much about its commitment and history of commitment to public service in its public documents.) Many of Goldman’s leaders have gone into public service, and the firm also regularly recruits people from public service. The firm also makes substantial philanthropic contributions and encourages its employees to volunteer. While those at the firm may no longer be so modest in their lifestyles and demeanor as was true back in my early days there, the ethic of doing public service has remained strong, though the emphasis of the reasons of why it’s encouraged may have changed.

Based on my interviews with employees, the sense of serving a higher purpose that pervades the firm leads to the rationalization that they must strive to be the best (and that they deserve to be paid the most) because they are serving a more important master than just the drive for money.⁵ This leads them to believe that Goldman should be given the benefit of the doubt about its dealings.

Many at Goldman subscribe to the notion that because the firm serves a higher purpose, they are more driven to excellence and are more dedicated than their peers at other firms. The pursuit of profit is portrayed as virtuous, and hard work is viewed as a kind of, for lack of a better phrase, religious duty. The idea of a corporate culture having the characteristics of religious belief only works as a kind of general parallel. And my use of religious terms or phrases should be understood only as analogy, to help explain the ethos.

Employees at Goldman do even often use religious terms to describe the nature of the firm’s work, and there is the element of something like blind allegiance, or faith, in the devotion of employees to the firm. A religious-like work ethic is an important force behind Goldman’s relentless pursuit of excellence and its people’s devotion. Goldman’s atmosphere is one in which the pursuit of excellence is seen as the good and right thing to do, and its success (including economic gain) is well deserved. The feeling is augmented by the belief that a higher judge (or partnership committee) “elects” people who are destined for something greater and whose good favor is reflected in successes. Continuing with the religious parallel, the business principles can be seen as a form of Goldman’s own Ten Commandments, and the election to partnership as a sort of ascension to heaven. This organizational aura or overtone is such a part of the culture and identity of the people at Goldman that an attack on the firm tends to be perceived psychologically as almost a “holy war” (the wording is paraphrasing from an interview of an executive at a competitor). This helps explain why the firm is so aggressively defensive, and why it is blinded by the sense of higher purpose. It is difficult for someone who has been socialized through training and has rationalized and made sense of what he or she is doing in this way, who has become, for lack of a better word, a zealot, to question behavior or instructions.

This belief in the good of the firm seems to contribute to the commitment to hard work and outperformance, which has benefited the firm, but it has slowly and incrementally changed to also be used as a rationalization for behavior that may not be consistent with the original meaning of the firm’s principles. The sense of higher purpose explains why Goldman brushes off cases of bad behavior as “one-offs” or “exceptions,” why its employees should get swine flu vaccinations ahead of others, and why the firm believes that while its peers may not be able to handle situations where conflicts need to be managed through ethical behavior, Goldman can.

I’m not saying that Goldman doesn’t expect its employees to do good in the world, or that they don’t do so. The firm and its employees have given hundreds of millions of dollars to charity (keep in mind, though, that they have also made tens of billions). Goldman runs many community and public service initiatives, including pledging $500 million to help develop ten thousand small businesses and dedicating resources to develop the business and management skills of ten thousand women in the developing world.

Two of the most visible examples of Goldman’s philanthropy are the Goldman Sachs Foundation, created at the time of the IPO with $200 million, and Goldman Sachs Relief Fund and Outreach, created in response to the attacks of September 11, 2001. Charles Ellis writes, “[N]o other organization spawns so many trustees of colleges and universities, art museums, foundations, libraries and hospitals” and states that at Goldman, “service and serious giving are expected, and leaders are expected to set the pace.”⁶ There is also a serious expectation that Goldman employees will participate in the firm’s philanthropic and charitable activities. According to a Goldman’s website section called “Citizenship,” in 2012, more than twenty-five thousand Goldman Sachs employees from forty-eight offices partnered with 950 nonprofit organizations. When I worked at Goldman, almost everyone I worked with gave time to Community Teamworks, one of the very few acceptable excuses for delaying a meeting, call, or deadline. This still holds true. For an employee not to participate would be frowned upon.

But the firm’s corporate citizenship, well intended and generous as it may be, serves a dual purpose. Goldman promotes and leverages the positive publicity that attends its and its current and former employees’ public service, and the firm’s reputation and network of external connections both benefit from it.

“God’s Work”

CEO Lloyd Blankfein has spent a lot of time explaining Goldman’s actions since the credit crisis. On one occasion, he defended Goldman’s profits and bonuses with a nod to the firm’s fiduciary responsibility to its shareholders and a further claim that “preserving the franchise” for them is “also for the good of America … I think a strong Goldman Sachs is good for America.”⁷ More notoriously, he was quoted in London’s Sunday Times as saying, “We have a social purpose” in referring to the banking industry and further explained, “I’m doing God’s work.” The media response was overwhelmingly derisive. Jon Stewart joked that when Blankfein said he was doing God’s work, he most likely meant “earthquakes and hurricanes.”⁸ Stephen Colbert pointed out that Blankfein never specified which God, and speculated that it perhaps was “Shiva, Lord of Destruction.”⁹ Blankfein quickly apologized for his remarks. In fact, he later remarked that he had learned his lesson about joking around with reporters and no longer even says “God bless you” when someone sneezes.¹⁰

It is not the first time Goldman and religion have been associated. For example, when discussing the management committee in an interview, then senior partner Steve Friedman said, “Our management committee is like a college of cardinals. They’re very talented people, and in the College of Cardinals, a substantial number of them have a reasonable, legitimate belief that they should be elevated.”¹¹ What’s more, at Goldman a mentor, or someone who was supportive of your career, was often referred to as a “rabbi.” According to my interviews, without a rabbi it would be difficult to be elected a partner.

In a discussion about morality and markets at St. Paul’s Cathedral in London in 2009, Goldman international vice chairman Brian Griffiths, a former adviser to Margaret Thatcher, described giant paychecks for bankers as an economic necessity: “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”¹² Again, there is an allusion to individual sacrifice for a higher purpose—in this case, the common good. Dedication to a higher purpose can also account for what William Cohan describes as “the mystery of Goldman’s steadfast, zealous belief in its ability to manage its multitude of internal and external conflicts.”¹³

One of the problems with zeal, religious or otherwise, is that it can blind zealots to considerations not directly associated with their higher purpose, and that blindness might be, at least in part, behind Blankfein’s subconscious choice of words in referring to the firm doing “God’s work,” as well as Goldman’s failure to see the larger picture (including believing that its network in public service is a disadvantage), and its inability to immediately grasp the public outrage at its conduct during the financial crisis. The belief in serving a higher purpose is implicit in the way Goldman defines itself, not only as an elite firm, smarter and better than the others, but as something more. This is not a new phenomenon, because “there has always been a whiff of sanctimony about the firm. It not only wants to make money; it wants to be seen as a force for good.”¹⁴

The need to endure years of grueling work to be elected partner was offset not only by money but also, more importantly, by the “psychic rewards” found in a sense of affiliation, of “belonging to a select group with a hallowed history and a common purpose.”¹⁵ Rob Kaplan, who spent his entire career at Goldman and ultimately rose to vice chairman, attributes this sense to the need of humans, as social animals, to “be part of an organization that has meaning … [which] helps give their lives meaning,” noting that the reason people are willing to work hard for relatively low compensation is that they “aspire to something that is bigger and more meaningful than financial reward. People want to be proud of what they do. Yes, they want to be rewarded, but they typically need other reasons to ‘join up’ and stay with an organization. Otherwise, they’ll treat it as a convenient stopping point on the way to something more meaningful.”¹⁶

“Government Sachs”

The sense of higher purpose is reinforced by the relationship between Goldman and the government. The White House has often looked to Wall Street experts for advice, and Goldman partners have advised several presidents and cabinet members, leading to an incestuous web between government and Goldman—hence the nickname Government Sachs. Goldman also realized the wisdom of hiring former senior government officials. At the highest levels within Goldman, there was, and is, a conscious effort to build and maintain relationships with important people. The emphasis on this network accelerated when Goldman began to expand. The firm benefited greatly and was able to increase its network when John Rogers, former Undersecretary of State for Management, and Gerald Corrigan, former president of the Federal Reserve Bank of New York, both joined Goldman in 1994. Today, they serve very senior and important roles at the firm. The web of connections between Goldman and government adds to the firm’s mystique and promotes the sense of higher purpose felt by many Goldman employees. However, internally the sense of higher purpose obscures the dual purpose of public service. To many at Goldman, the only reason Blankfein visits government officials so often is that he is performing a civic duty as an expert. Many do not concede any possible truth in the accusations of undue influence or advantageous access.

Over the years, the extent of Goldman’s network of government connections has been viewed externally as a great competitive asset or as a way to gain an unfair advantage, depending on the viewer’s perspective, the prevailing economic scenarios, and the competitive environment.¹⁷ One admirer is impressed by the “phenomenal number of people rotating out of the firm at an early age, looking to do something good for their country.”¹⁸ Another, speculating about “what [it is] about Goldman that makes it such a popular feeding ground for Democratic and Republican administrations alike,” says that “many insiders attribute the firm’s stature in Washington largely to a Goldman culture that values teamwork over individual self-gratification.”¹⁹

Others have taken a more cynical view, implying a self-serving motivation behind Goldman’s predilection for public service and for hiring former government officials. James Grant, years before the credit crisis, commented, “It is probably no accident, as the Marxists used to say, that the ex-president of the Federal Reserve Bank of New York, Gerald Corrigan, is today a managing director of Goldman. Mr. Corrigan would be just the right man to have on the premises in case the firm should trade itself into the kind of financial crisis from which only the Federal Reserve could help to extricate it.”²⁰ Also, there has been criticism that public officials give Goldman better treatment because they are hoping that when they finish their political careers, they can return to or work at or lobby for Goldman. Stephen Colbert joked, “Why are government employees filing a civil suit against Goldman Sachs? That’s just going to be embarrassing in a few years when they all go back to work at Goldman Sachs.”

Many non-Goldman people I interviewed said that Goldman exploits its good works and sense of higher purpose to help rationalize or explain why it is uniquely able to manage potential client conflicts (“because we are Goldman”). From my interviews of non-Goldman employees, the consensus is that Goldman shrewdly uses its government contacts and its good guy image to benefit the firm in increasing its opportunities. As long ago as 1992, for example, Goldman’s successful bids for deals with the Russian government were attributed in large part to the firm’s Washington connections.²¹ Such concerns led CBS News to analyze the “revolving door between Goldman and government.”²² Good press or bad, by being associated with the most important people, Goldman spun the image to its advantage, prior to being questioned about it during the crisis.

The fact that Goldman partners did so much good for humanity did serve for many years to help distinguish the firm in the eyes of the public and added to the Goldman mystique. It still helps the firm attract and retain employees, as well as motivate them.

Whitehead, Rubin, and Friedman were seen as having used government positions to apply their skills to do good for the nation, as well as satisfy any personal ambition. As role models, they inspired Goldman employees to think about public service, and the firm leveraged that sense of social responsibility to further the perception of Goldman’s sense of higher purpose as well as for other purposes that help differentiate the firm.

Public Service Rationalizing Behavior

Of course, the sense that one is doing God’s work or serving a higher purpose can easily transmute into a holier-than-thou attitude and an excuse for any behavior, until the ends begin to justify the means. Believing that Goldman was different—doing good for others, better than any other firm at managing conflicts, viewed as a source of important expertise by the government—became an excuse for questionable behavior, as though Goldman’s good guy status exempted individual behavior from close scrutiny. The consequence was the development of the sort of arrogance that comes with believing one’s actions are beyond question because of the rarefied atmosphere within which one operates. On the flip side, it must also be said that there have been some positive organizational consequences of the sense of higher purpose. In addition to the public good done, it has also encouraged employees to work harder than one might think possible, at least in part because it imparted a sense of greater meaning to that work. It also makes it more difficult for employees to leave once they are socialized into the beliefs.

Concerns are increasingly raised about Goldman’s influence, its connections to government, and the potential for impropriety. Bloomberg News columnist Matthew Lynn put it this way: “While no one would dispute that New York-based Goldman Sachs is a money-making machine full of alpha-brains, it isn’t healthy for so many decision-makers to be drawn from one source … It is hard to ignore the trend for appointing Goldman employees to big government-appointed jobs. In the information technology business, they used to say, ‘No one ever got fired for buying IBM.’ In politics right now, the motto seems to be, ‘No one ever got fired for hiring Goldman Sachs.’”²³

There is certainly a long list of Goldman alumni in government and government alumni at Goldman (see appendix C for a summary). At the time of the financial crisis, Hank Paulson, former Goldman CEO, was secretary of the Treasury and had many Goldman alumni working for or advising him.²⁴ Meanwhile, the chairman of the New York Fed at the time was Steve Friedman, who was on the Goldman board of directors.

Undoubtedly Goldman, its employees, and its alumni have made many valuable contributions in their public service. Obviously this should be commended and appreciated. The danger, though, for Goldman and for the public, is that this strong commitment to public service is a contributing factor in the firm’s cultural change, not seeing the change and justification of behavior that increasingly pushes up against—some have argued crosses—the line of legality.